DEUTSCHE Bank’s demise has gathered pace after its US wing dramatically failed the US Federal Reserve’s annual stress tests due to “widespread and critical deficiencies” which could cause chaos if the global finance system lurched back towards a 2008-like crisis.

The German giant is expected to begin a slow retreat from investment banking after years of poor performance but the Fed board’s unanimous objection to Deutsche Bank’s US capital plan marks another blow for the German lender, sending its share price down another one percent.

With little chance of a return to profitability at Deutsche in the future, its financial health globally has been under intense scrutiny after S&P cut its rating and questioned its plans.

The US stress tests were introduced after the chaos of the 2008 financial crisis and every year America's central bank, the Federal Reserve (equivalent of the Bank of England) puts the country's top banks, including foreign subsidiaries like Deutsche through tests to see if they are sufficiently resilient to survive another financial crisis like that seen in 2008.

Firstly the Fed measures want to know if banks are holding sufficient capital - real money - to cope with a recession and secondly it focuses on banks' "capital plans" such as how much cash they intend to return to shareholders.

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It’s like a plane that isn’t safe to fly because the flight systems are malfunctioning.

David Hendler, Viola Risk Advisors

Deutsche passed the first test but failed the second. The Fed said in a statement: “Concerns include material weaknesses in the firm’s data capabilities and controls supporting its capital planning process, as well as weaknesses in its approaches and assumptions used to forecast revenues and losses under stress.”

David Hendler, an independent analyst at New York-based Viola Risk Advisors said he was “astounded” at the continued risk and operational problems at the subsidiary of a major global bank.

He said: “It’s like a plane that isn’t safe to fly because the flight systems are malfunctioning.”

Deutsche Bank said it had made significant investments to improve and will work with regulators to “continue to build on these efforts.”

The news comes after months of negative headlines for the German giant.

Former chief John Cryan and Christian Sewing (Image: GETTY)

The troubled bank reported a 79 percent drop in net profit in the first quarter and with the bank’s demise now veering towards becoming a national embarrassment for Germany, new CEO Christian Sewing told shareholders at the recent AGM: "It won’t do us any harm to be a bit more boring.”

Mr Sewing’s comment followed a decade of fines, sinking profits and cuts and the German giant announced in April it could not compete in the corporate and investment bank arena.

Mr Sewing said in a statement following the bank’s first quarter losses that although retail banking was still strong “we are not strong enough in other areas of this business”.